March 3, 2014
Tomasz Trzósło, managing director of Jones Lang LaSalle in Poland, talks to Elżbieta Wrzecionkowska about the country’s real estate market and its prospects.
Poland has one of the most rapidly growing real estate markets in Europe and is catching up with developed countries. This year, the supply of office space in Poland will reach 7 million square meters. Is that enough?
It depends on your point of view. Poland still has significantly less office space per person than some Western European markets. In Warsaw there are about 2 sq m of office space per person while the European average is 5 sq m. And cities like Düsseldorf and Munich have more than 15 sq m. On the other hand, demand for office space from tenants is growing slowly in Poland and the vacancy rate is on the rise. The Polish economy is growing, allowing companies to expand and stimulating demand for offices. But this is a gradual trend and would not justify a surge in the supply of office projects.
Last year, demand for office space in Warsaw reached 633,000 sq m, the highest ever. A revival was also noticeable in other cities. Will this trend continue in 2014?
We think it will, both in Warsaw and in other large Polish cities. Our research shows that the total amount of space likely to be leased out in 2014 should be similar to that in 2013. Our agents are working on big deals on the Warsaw market and markets outside the capital. It should be noted that the 633,000 sq m you have mentioned represent gross demand, that is all lease agreements signed in 2013, including renegotiations. If renegotiations are excluded, demand stood at 450,000 sq m. However, this still includes lease agreements signed by tenants relocating from one building to another and vacating a similar or larger amount of space in the old building than they are leasing in the new one. Such relocations account for a significant proportion of total demand. Consequently, the total amount of office space leased is growing slower than supply, resulting in a rise in vacancies in Warsaw. This should make developers cautious about starting new office projects on the Warsaw office market.
Last year was also good in terms of the value of transactions on the commercial property market. Investors were eager to buy. What were the reasons for this?
Poland is still an attractive country for investors and I am convinced it will continue to be so. Investors look at the growth potential of the Polish economy and the expected increase in property values in the medium and long run. Also important is the perception of Poland as a stable, secure and predictable country—a trustworthy one.
Poland is attractive to investors operating not only on the office market but also on the retail and residential markets. What do you think are the country’s biggest assets?
The biggest transaction on the Polish property market in 2013 in terms of value was carried out in the retail segment – the Silesia City Center mall in the southern city of Katowice was sold for more than 400 million euros to a consortium of foreign investors. The deal is proof that investors are interested in good Polish shopping centers that offer stable rental income and a potential for income growth as buying power increases and pushes retail sales and rents in these centers up. However, this only applies to leading shopping centers. Less attractive premises do not attract that much interest from investors.
More companies are opening not just accounting centers in Poland, but also offices offering advanced financial and IT services. As a firm advising companies that plan to start operations in Poland, do you think this country has a chance of becoming a European hub for such services?
We provide advice to a growing number of companies offering advanced financial services. Jones Lang LaSalle has been very active in this sector for years, both in Warsaw and in other large Polish cities. In 2013 alone, we signed a large number of lease agreements as an agent for companies operating in this sector. Among them were IBM, which leased 8,670 sq m in Katowice, Cisco (7,000 sq m in Cracow), Eurobank (6,100 sq m in Wrocław), ING Services Polska (5,600 sq m in Katowice), Credit Suisse (4,300 sq m in Wrocław), OpusCapita (4,000 sq m in Toruń), and RWE (3,000 sq m in Cracow). I believe that Poland will be developing towards increasingly advanced business, financial and IT services. A key asset for us is human resources—a strong pool of educated workers with a command of foreign languages. We have the potential to become one of the most important locations for advanced financial and IT services not only in Europe but globally. We must not waste this potential.